The announcement was widely anticipated, but will finally take place this week, ESPN President John Skipper says in a memo to staff.
The cuts will affect about 300 people – equal to 4% of the 8,000-person staff. People will be notified through Friday. The cuts are expected to be spread across the company, not targeting particular departments or businesses.
“We will be as supportive as we can during this transition, including providing a minimum of 60-days notice, a severance package reflective of [employees’] years of service, and outplacement benefits to help them find future employment,” Skipper says in his note.
He’s framing this as a proactive strategy to “reimagine our future, to embrace change and make the right choices for our business.” He adds that the “demand for sports remains undiminished, though the landscape we operate in has never been more complex.”
He specifically cites planned initiatives to offer ESPN on digital platforms, develop personalized ad sales, and deal with “current and future distribution partners.”
But others see things differently. Disney shares are down 7.2% since early August when execs told investors that ESPN, its cash cow, had lost more viewers than they anticipated — requiring them to lower a key financial target.
That “was apparently a wakeup call to the Street,” driving media stock prices down an average of 13%,” MoffettNathanson Research’s Michael Nathanson observed.
The company will talk to Wall Street again on November 5, when it releases earnings numbers for the quarter that ended in September. In the call, “cost controls at ESPN will be of focus,” especially following the layoff discussion, Stifel Research analyst Benjamin Mogil noted last week.
Yesterday RBC Capital Markets analyst David Bank said that he expects ESPN to “manage non-programming expenses to maintain margin integrity in the face of modest cord cutting revenue pressure.”
Here’s Skipper’s note to the staff:
The demand for sports remains undiminished, though the landscape we operate in has never been more complex.
Our 36 years of continuous growth and success has been driven by our consistent willingness to reimagine our future, to embrace change and make the right choices for our business, including hard decisions that affect people who have been integral parts of our efforts.
Beginning today, we will be enacting a number of organizational changes at ESPN to better support our future goals – a process that will include the elimination of a number of positions, impacting friends and colleagues across the organization.
We carefully considered and deliberated alternatives before making each decision. The people who will be leaving us have been part of ESPN’s success, and they have our respect and appreciation for their contributions. We will be as supportive as we can during this transition, including providing a minimum of 60-days notice, a severance package reflective of their years of service, and outplacement benefits to help them find future employment.
These changes are part of a broad strategy to ensure we’re in position to make the most of new opportunities to build the future of ESPN. These ongoing initiatives include:
- Constant and relentless innovation, including integrating emerging technology into all aspects of our business.
- Enhancing our sales and marketing efforts with new tools and techniques that generate greater data, personalization and customization for our advertisers.
- Integrating our distribution efforts to better serve current and future distribution partners with our industry leading networks and services.
No matter how many times we’ve adjusted course to lead the industry over the years, the decisions affecting our employees are never made lightly. It never gets any easier, but it’s a necessary part of our continued strategic evolution to ensure ESPN remains the leader in sports as well as the premier sports destination on any platform.
I realize this process will be difficult – for everyone – but we believe the steps we are taking will ultimately create important competitive advantages for our business over the long term. I sincerely appreciate your professionalism and continued support as we move forward to ensure the continued success of ESPN and assure sports fans everywhere the best is yet to come.
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